Why Can’t (or Won’t) Ohio’s Old Media See Through Ted Strickland’s Fiscal Posturing? (State Is 600+ $350 Mil Ahead of Budget)

June 14: Ohio State Finances Update: Strickland’s Tight Budget Claims Still Ring Hollow; Ohio’s Press Is Still Asleep

____________________________________________

NOTE: The June 14 follow-up post above corrects for a $284 million error in understating expenses made by the Ohio Office of Budget and Management in April that caused an offsetting error in May. Because of that $284 million error, the State, as of April 30, was $347 million better off than it anticipated it would be in its original budget, not the $631 million noted in the post.

Other than the correction to the headline, this post has not been, and will not be, changed to reflect OBM’s error.

____________________________________________

QUICK TAKE (added at 1 PM): Ohio Governor Ted Strickland claims that the state is in a tight budget situation with falling revenues due to the previous administration’s tax cuts. The facts are that tax receipts have come in ahead of budget, thanks to higher income and franchise tax collections; that spending has been way below below budget; and that the state was over $600 million better off at the end of April than it expected to be when the General Assembly passed the current fiscal year’s budget. Yet Ohio’s Old Media takes what the governor says on faith, and appears to have questioned nothing.

_________________________________

The Associated Press’s unbylined report carried at the Toledo Blade didn’t question “it” in their Sunday report:

Gov. Ted Strickland said he will deny pay raises for about 3,400 state workers because of declining budget revenues.

Mark Niquette of the Columbus Dispatch (also home of Joe “I Love Ted’s Accounting Sleight of Hand” Hallett) displayed no curiosity over “it” on Saturday when he wrote that:

The governor has been saying for months how tight the state budget is as a result of the struggling economy and loss of revenue from tax cuts enacted two years ago.

The Cincinnati Enquirer had a story on Friday afternoon which didn’t mention “it” at all. The report contained mostly dry facts, but did include this quote found in most of the other stories:

“I greatly value the work of Ohio’s public servants, but we are facing tough financial times,” Strickland said in a statement.

Cincinnati TV station WLW’s four-paragraph story didn’t mention “it” either, but fairly gushed about what the governor is doing:

Gov. Ted Strickland is continuing to pare down the state’s finances.

Strickland announced today that he will deny pay increases, cost-of-living increases and merit raises for his agency directors. The governor says the state is looking for ways to be more efficient.

A Cleveland Plain Dealer search on “Strickland” at 7PM on Monday yielded nothing relevant, let alone any mention of “it” (but see the UPDATE below).

So what is “it”? “It” is what Ted Strickland has been saying about the state of the state’s finances, and why they are where they are (from the AP report):

….. Mr. Strickland, a Democrat, has been saying for months that the state budget is tight because of a struggling economy and the loss of revenue from tax cuts enacted two years ago under former Gov. Bob Taft.

As of the end of April, that was (and probably still is) first-class, Grade A baloney.

The state’s finances may possibly have deteriorated a bit since then, but I doubt that the overall situation has changed much. (I will update below when the Ohio Office of Budget and Management issues its May Monthly Financial Report; it should have come out yesterday, but it didn’t.)

The detail, which consists of portions of Pages 13 and 21 of the April Report (PDF) issued on May 10, has been converted to graphics that can be seen at this backup post.

Here’s the fiscal picture through the first 10 months of the state’s fiscal year:

• Tax receipts are $153 million more (that’s right, folks, MORE) than was anticipated. Some of the components: Personal income taxes are $167 million ahead of what was expected and only $32 million (0.5%) lower than the previous year at this time, even though tax rates were reduced 8.4%; franchise tax collections are $158 million ahead of what was expected; the big shortfall, at $161 million below what was expected, is in sale tax collections. I don’t suppose it would be out of order to ask if the new Commercial Activities Tax is holding back retail expansion plans, would it?
• State itemized spending is (catch your breath here) $800 million less (that’s right, folks, LESS) than anticipated, mostly because Medicaid spending is $689 million lower. That 8% Medicaid reduction below expectations is an impressive result — Is it really possible that the legislature and Bob Taft deserve some credit for Medicaid reforms that slipped past everyone?
• After minor transfers to various funds, total disbursements for the year are $794 million LESS than anticipated.
• Non-tax receipts, net of $15 million in transfers from other funds, are way down by $316 million; that is more than entirely due to $364 million lower reimbursements from Uncle Sam because of the lower Medicaid spending just mentioned, and has nothing whatsoever to do with “tax cuts enacted two years ago.”

So let’s remove the eye glaze. Here are the three takeaways:

1. The state has taken in $163 million less than expected (+$153 mil minus $316 mil), and the shortfall has nothing to do with “tax cuts.”
2. The state has spent $794 million less than expected.
3. The state, as of the end of April, was $631 million BETTER OFF than expected ($794 mil less spending minus $163 mil less revenue).

“Tough times,” schmuff times, Ted.

Of course, there’s not a thing wrong with the spending cuts Governor Strickland has chosen to make on his own. But spare me the idea that these “pare downs” are grand gestures. The possible lunch cuts ($4 million spread over 2 years, according to the link) and the wage freezes referred to above (perhaps $5.3 million if they stay in place for a full year, according to the various linked articles) together amount to only $7.3 million ($2 mil + $5.3 mil) even if they take place in full.

I’ll leave it to the reader as to why Ted Strickland is doing what he is doing, and to Ohio’s Old media as to why he’s getting so much ink for cutting the pro rata equivalent of about 2-1/2 hours of state spending on a 24-7-365 basis in a roughly $25 billion budget. But one thing is crystal clear: He’s not doing it because the state’s coffers are contracting, because in reality they are expanding.

The real questions people should be asking are these:

• Why is Governor Strickland pleading state poverty when the fiscal year’s first 10 months have, on the whole, turned out so much better than expected?
• Why is Ohio’s media totally failing to follow up on the governor’s incomplete claim of “declining budget revenues,” and not challenging the unsupported “tax cuts” blame game he is playing?
• Instead of wondering whether, when, and how the governor is going to drop the tax-increase bomb, why aren’t Ohio’s legislators and taxpayers asking for the second 8.4% installment of the planned income tax cut, plus repeal, before it does serious damage to the state’s economy, of the execrable Commercial Activities Tax?

____________________________________

UPDATE, 1 PM: The Plain Dealer came out with an editorial this morning that made valid points, but naively bit on the tax-revenue bait:

Tax dollars are tight in Ohio, so tight that Gov. Ted Strickland just announced he’s freezing salaries for all state workers whose pay he controls.

Like the governor’s widely publicized limits on state employees’ meal expenses last month, this move is certain to score points with voters. But let there be no doubt that Strickland is putting style over substance.

….. All of that pales in comparison to the $118 million the state government would keep if Strickland would means-test his proposed property tax break for senior citizens.

….. As the Senate ponders final changes to the state’s two-year budget, Strickland should do what’s right for Ohio and amend his property tax reduction plan.

Read this post, PeeDee. You’ve been snookered.

Currently the property-tax homestead exemption is means-tested. The governor has proposed changing that to give an exemption to every senior-citizen homeowner. That exemption has passed the House. It’s not my favorite form of tax reduction, but it IS a tax reduction, and should get through the Senate too.

That still leaves hundreds of million in tax reductions that need to come from somewhere. :–>